If you want the cliff notes, basically earnings have continued to degrade at “The Shack”. And that’s left investors wondering how this massively debt-laden retail dinosaur can pull a turn around.

Back to the commercial…

I give kudos to RSH for owning up to the abundance of outdated stores. And under new management, the company is moving to give their stores a big makeover… they’re clearly trying to keep our focus on this point.

But the problem isn’t how pretty or new their stores are. The crux of the problem is there are plenty of other places to get exactly what Radio Shack sells both cheaper and faster. (Best Buy, Amazon, Conn’s, etc…)

Even if RSH can leverage it’s brand name, seeing the company has been around since 1899, it seems unlikely they’ll be able to bring their debt back to a manageable level while growing revenue.

And then there’s the latest blow dealt to investors: 500 retail outlets were closed just this week. That’s roughly 10% of their retail outlets!

What exactly is going on over at Radio Shack?

Well, as I told you previously, RSH has tons of debt (with a debt to equity ratio of 1.27x) and is experiencing very heavy EPS shrinkage. Quarter over quarter EPS fell a staggering 258%.

Per RSH management, they’re trying to implement a 5-pronged restructuring approach. The plan includes redefining their brand, changing up product mix, refreshing stores, and attempting to regain financial flexibility.

Sunday’s commercial touched on a few of those points. But certainly shutting down 10% of their retail footprint can’t help to raise the question, how bad is RSH bleeding?

Unfortunately for investors, there’s not much to look forward to until at least 2017 (the soonest analysts see RSH turning a profit). And with earnings coming out on February 24th, and the spate of retail earnings misses (remember- the almighty Amazon missed expectations)… you can bet there won’t be much to cheer about.

Even as RSH continues to slide from last year’s over-hyped rally, the bleeding for investors appears far from over. I’d go as far to say we’ll see new 52-week lows and a break below $2 before the month is out.

In fact, it’s my belief that Radio Shack has the potential to become a sub-$1 penny stock!

Keeping you one step ahead,

A.J. Watkinson

Summary

Article Name

RSH – Penny Stocks to Watch

Author

AJ Watkinson

Description

We analyze Radio Shack’s (RSH) financials after seeing their crafty Super Bowl commercial.

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About The Author

A.J cut his teeth while working for more than 12 years on the corporate side of the financial services industry in the suburbs of New York City. In addition, A.J. has successfully traded stocks, options and currencies as an independent trader since the late 90's.
Eventually A.J. moved out of the "rat race", landing in North Scottsdale, Arizona.
During the past few years, he's worked as the editor of a number of high profile financial newsletters. In this role, he's run trading services for penny stocks, options, currencies, ETFs, and FOREX. While under his direction, each of these trading services had turned in positive performance... something very rare in the financial newsletter industry.
In addition, he's been a regular contributor to a number of financial websites- writing under multiple pen names.
A.J.'s current goal is to share his real world experiences and success (and failures) in the various financial markets to help others not only make money- but avoid losing it.
It's this vision and passion that has led A.J. to launch pennystockreporting.com. Most of all, A.J. hopes to keep the little guy from getting caught up in the highly unscrupulous penny stock pump and dump scene.

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